Question 1

Which of the following statements is true?

Accepted Answer

A consolidated group, which consists of a parent company and its subsidiaries, determines its general business credit on a consolidated basis. This means that the credits of all members of the group are combined to calculate the total general business credit available to the group.

Question 2

Parent Corporation purchases a machine (a five-year property)for $20,000.It claims $4,000 of depreciation under the MACRS rules in the first year it owns the property.At the close of business on the last day of the first year,Parent sells the machine to a 100%-owned corporation (Subsidiary)for $18,000.Subsidiary immediately commences depreciating the machine as a five-year property using the regular MACRS rules.What depreciation can be claimed by Subsidiary Corporation in the first year it uses the machine?

Accepted Answer

The answer of Parent Corporation purchases a machine (a five-year...

Question 3

Steps 1 through 3 result in the member's separate taxable income.Combine these amounts to equal the group's combined taxable income.

Accepted Answer

The answer of Steps 1 through 3 result in the...

Question 4

Identify which of the following statements is true.

Accepted Answer

Alternative minimum tax (AMT) payments from prior consolidated return years can be carried over and claimed as a credit on current or future consolidated returns by the affiliated group.

Question 5

Compute each group member's taxable income (or loss)based on the member's own accounting methods as if the corporation were filing its own separate tax return.

Accepted Answer

The answer of Compute each group member's taxable income (or...

Question 6

Define intercompany transactions and explain the two types of transactions.

Accepted Answer

The answer of Define intercompany transactions and explain the two...

Question 7

Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.

Accepted Answer

Intercompany dividends and undistributed subsidiary earnings are eliminated in consolidation, so they do not create temporary differences between the parent and subsidiary companies.

Question 8

Gee Corporation purchased land from an unrelated corporation several years ago for $105,000.The land was used by Gee as a storage lot for company trucks.Gee sold the land to Wilkers,its 85%-owned subsidiary corporation,last year (July 3)for $115,000.The land was also used in Wilkers' trade or business.Wilkers Corporation sold the land this year (August 22)for $130,000 to a corporation that was not a member of the affiliated group.The $130,000 purchase price is to be collected in five equal,annual installments,commencing with the current year's sale date.What gains and losses are recognized,deferred,or restored by Gee and Wilkers Corporations?

Accepted Answer

The answer of Gee Corporation purchased land from an unrelated...

Question 9

What are the five steps in calculating consolidated taxable income?

Accepted Answer

The answer of What are the five steps in calculating...

Question 10

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

Accepted Answer

Capital loss carrybacks and carryovers operate similarly to NOLs in that they allow taxpayers to offset current and future taxable income with losses from prior years.

Question 11

Why are other intercompany transactions not given any special treatment?

Accepted Answer

The answer of Why are other intercompany transactions not given...

Question 12

Identify which of the following statements is false.

Accepted Answer

Affiliated groups of corporations filing a consolidated tax return ARE eligible for the small corporation exemption from the corporate alternative minimum tax.

Question 13

The Alpha-Beta affiliated group has a consolidated regular tax amount of $52,000 and a tentative minimum tax amount of $50,000 in the current year.The maximum general business credit that can be used on the consolidated return is

Accepted Answer

A)The general business credit that can be used equals the group's net income tax ($52,000)minus the larger of (1)tentative minimum tax ($50,000),or (2)25% of net income tax in excess of $25,000 ($6,750)or $2,000 ($52,000 - $50,000).

Question 14

Identify which of the following statements is false.

Accepted Answer

The answer of Identify which of the following statements is...

Question 15

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

Accepted Answer

The statement is incorrect because the alternative minimum taxable income is computed on a consolidated basis for the entire group, not separately for each individual group member.

Question 16

Parent Corporation purchases a machine (a five-year property)for $20,000.It claims $4,000 of depreciation under the MACRS rules in the first year it owns the property.At the close of business on the last day of the first year,Parent sells the machine to a 100%-owned corporation (Subsidiary)for $18,000.Subsidiary immediately commences depreciating the machine as a five-year property using the regular MACRS rules.
What gain is reported by Parent Corporation in the first year that Subsidiary Corporation depreciates the machine?

Accepted Answer

The answer of Parent Corporation purchases a machine (a five-year...

Question 17

Make adjustments to each group member's taxable income for certain intercompany transactions,inventory adjustments,dividends received,excess loss (negative investment basis)accounts,and built-in deductions.

Accepted Answer

The answer of Make adjustments to each group member's taxable...

Question 18

Adjust the group's combined taxable income for items reported on a consolidated basis to equal the consolidated taxable income.

Accepted Answer

The answer of Adjust the group's combined taxable income for...

Question 19

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

Accepted Answer

Each corporation is not permitted its own $40,000 statutory exemption under the consolidated alternative minimum tax. Instead, the $40,000 exemption is divided proportionally among the members of the consolidated group.

Question 20

Remove certain gains,losses,and deductions from each member's taxable income since they must be computed on a consolidated basis (e.g. ,NOLs,capital gains and losses,Sec.1231 gains and losses,charitable contribution deductions,dividends-received deduction,percentage depletion under Sec.613A).

Accepted Answer

The answer of Remove certain gains,losses,and deductions from each member's...

Quiz 8: Consolidated Tax Returns

Which of the following statements is true?

Steps 1 through 3 result in the member's separate taxable income.Combine these amounts to equal the group's combined taxable income.

Identify which of the following statements is true.

Compute each group member's taxable income (or loss)based on the member's own accounting methods as if the corporation were filing its own separate tax return.

Define intercompany transactions and explain the two types of transactions.

Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.

What are the five steps in calculating consolidated taxable income?

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

Why are other intercompany transactions not given any special treatment?

Identify which of the following statements is false.

The Alpha-Beta affiliated group has a consolidated regular tax amount of $52,000 and a tentative minimum tax amount of $50,000 in the current year.The maximum general business credit that can be used on the consolidated return is

Identify which of the following statements is false.

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

Make adjustments to each group member's taxable income for certain intercompany transactions,inventory adjustments,dividends received,excess loss (negative investment basis)accounts,and built-in deductions.

Adjust the group's combined taxable income for items reported on a consolidated basis to equal the consolidated taxable income.

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

Remove certain gains,losses,and deductions from each member's taxable income since they must be computed on a consolidated basis (e.g. ,NOLs,capital gains and losses,Sec.1231 gains and losses,charitable contribution deductions,dividends-received deduction,percentage depletion under Sec.613A).